Analyst Andreas Bokkenheuser sees attractive risk-return profile in Bumi, following recent share price underperformance.
While the risks are widely acknowledged – high financial risk, tax investigation overhang and EPS dilution, the positives should not be completely ignored. In addition to the positive trend in coal price, Bumi owns a number of Indonesia’s most valuable mining assets.
Andreas projects Bumi to generate an annual EBITDA of US$1-1.15bn in 2010-12, in addition to the potential to raise US$1bn in fresh capital through the IPO of its non-coal assets.
Meanwhile, given Bumi’s partial ownership in Delta Dunia Makur (DOID), Andreas does not rule out the possibility for the former to acquire the latter. Bumi TP of Rp 3,700 implies 30% governance discount + 10% potential rights issue dilution and 12x forward PE. Risk to our TP would be the potential back-tax payments and penalties.
Sales comment: BUMI feels like yesterday’s story. We think that the risk/reward profile is better at Delta Dunia (DOID).
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